What is Form 1098-F: Understanding the Purpose, Significance and Requirements

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When most people think of tax forms, they picture the usual suspects—W-2s, 1099s, maybe a 941 here and there. But what about the forms that fly under the radar, like Form 1098-F?

If you’re working with organizations that have been involved in legal settlements or regulatory actions, this form matters more than you might think. It’s not just about reporting payments—it’s about staying aligned with IRS compliance when penalties or fines come into play.

In this blog, we’ll break down what Form 1098-F is, why it exists, who’s required to file it, and the key details you should know to handle this unique reporting requirement with confidence.

What is Form 1098-F?

The IRS Form 1098-F is used to report fines, penalties, and other amounts paid to the government for violating the law.  This form is typically issued to individuals or businesses that have paid such amounts during the tax year.

Who Must File Form 1098-F?

Here’s a breakdown of who must file Form 1098-F:

• Governmental Entities: This includes federal, state, or local government agencies responsible for enforcing laws and regulations. These entities collect payments related to fines, penalties, or settlements stemming from legal violations.
• Nongovernmental Entities Treated as Governmental: Some nongovernmental entities may also be treated as governmental entities for reporting purposes. This typically applies to organizations with the authority to impose fines or penalties under specific laws or regulations.

What Information is Required to Complete Form 1098-F?

When filing Form 1098-F, several key pieces of information are required to file accurately with the IRS. Here’s a breakdown of the required information:

Filer’s Information

• Filer’s Name, Address, and Telephone Number: Enter the name, address, and telephone number of the governmental and nongovernmental entities that imposed fines/penalties.

Payer’s Information

• Payer’s Name and Address: Enter the name and address of the individual or entity that paid the fine, penalties, and other amounts.

Payment Amounts

1. Box 1: Total Amount To Be Paid Under Suit, Order, or Agreement
   • Report the total(aggregate) amount required to be paid due to a suit, order, or agreement if it equals or exceeds $50,000. This includes all amounts related to any violations, investigations, or inquiries into potential violations of laws.
2. Box 2: Amount To Be Paid for Violation or Potential Violation
   • Enter the specific amount designated for the violation. If this amount isn’t specified, leave the box blank and enter code E in box 9.
3. Box 3: Restitution/Remediation Amount
   • Report any amount required to be paid (or costs to provide property or to provide services) which constitutes restitution or remediation. If the amount to be paid is not specified, leave this box blank and enter code E in box 9.
4. Box 4: Compliance Amount
   • Enter the amount due to the suit, order, or agreement needed to comply with the law. If this amount isn’t identified, leave the box blank and enter code E in box 9.

          For Example:

Corporation A broke some environmental laws in State Y and agreed with the state’s environmental agency to resolve the issue. As part of this agreement, Corp. A has to pay a total of $240,000. This includes:

• $40,000 in fines for breaking the law,
• $80,000 to help fix the environmental damage they caused, 
• $50,000 to clean up contaminated sites,
• $60,000 to improve their operations so they follow environmental rules.

 Therefore, an appropriate government official of the agency must report the required amount in the exact boxes of Form 1098-F.

• Box 1: Total Amount to be paid under the Suit, Order, or Agreement = $230,000 ($40,000 + $80,000 + $50,000 + $60,000)
• Box 2: Amount to be paid for Violation = $40,000
• Box 3: Restitution/Remediation Amount = $130,000 ($80,000 + $50,000)
• Box 4: Compliance Amount = $60,000

In this case, all relevant details must be accurately reported to comply with IRS requirements and to ensure that the necessary parties are informed of the payment obligations.

Additional Information

• Box 5: Date of Order/Agreement: 
  Enter the date of the order entered by the court or the agreement was fully executed.
  
• Box 6: Court or Entity: 
  Provide the name of the court or entity that issued the order or approved the agreement, if applicable.

• Box 7: Case Number:
  Enter the associated case number with the court order or agreement, if applicable.
  
• Box 8: Case Name or Names of Parties to Suit, Order, or Agreement: 
  List the case name or name of the parties involved in the case (suit, order, or agreement).
  
• Box 9: Code:
  Use the relevant codes based on the specifics of the payments and agreements:
  
  • A: Use code A if the payer makes multiple payments to satisfy the total payment required by the suit, order, or agreement.
  • B:  Use code B if multiple payers have a payment obligation under the suit, order, or agreement.
  • C: Use code C if multiple payees are under the suit, order, or agreement.
  • D: Use code D if the suit, order, or agreement requires the payer to provide services or to provide property.
  • E: Use code E if the total amount required is not identified. This code also applies when the agreement lacks clarity on amounts for property or services provided.

When is the Deadline to File Form 1098-F?

The deadline to file Form 1098-F electronically is March 31, 2025. Payer copies must be delivered on or before January 31, 2025. Filing Form 1098-F on time is essential to avoid IRS penalties and stay tax compliant.

Are There Any Penalties for Late Filing of 1098-F Form?

Failure to file or furnish your 1098-F forms on time can result in penalties. The penalty amount ranges from $60 to $660 per form, depending on the business size and submission time.

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